Dong Zhao, a shareholder with Bitfinex, has suggested that the embattled cryptocurrency exchange could be planning to launch an exchange-based token in the wake of the $850 million Tether scandal.
According to sources close to the story, several large investors in Asia have already shown interest in the proposals, with the suggestion that as much as $300 million in Tether stablecoin (USDT) has already been pledged towards the token.
— Zirui ⛰️ (@zirui_z) April 29, 2019
The move follows on from the decision to launch a token in 2016, after Bitfinex fell victim to a high-profile hack resulting in substantial losses for its customers. The exchange launched its BFX token, representing shares in the firm’s parent company IFinex Inc., which also owns Tether.
By April 2017, the firm was announcing it had fully redeemed the tokens, and had repaid all the investors who lost out as a result of the security breach. At the time, Bitfinex announced that it “will shortly be redeeming 100% of all currently issued and outstanding BFX tokens. This will be the final redemption of BFX tokens created in August 2016. After these redemptions, no BFX tokens will remain outstanding; they will all be destroyed.”
If the suggestion from Dong Zhao is confirmed, Bitfinex will now look to rerun the same model, in a bid to patch up an apparent $850 billion hole in its books.
This month, New York Attorney General Letitia James filed against IFinex after allegations the firm was commingling client money, without sufficient safeguards in place over its handling of Tether cash reserves.
The Attorney General has accused the firm of losing $850 million in a deal with the ill-fated Crypto Capital Corp, funds which have since been unrecoverable. According to the filing, the firm then allowed itself access to Tether cash reserves of $900 million.
Describing the move as a “cover up.” the Attorney General said this was in contrast to the pledges the company has made to investors in the dollar-backed stablecoin.
According to the Attorney General’s Office, “In order to fill the gap, executives of Bitfinex and Tether engaged in a series of conflicted corporate transactions whereby Bitfinex gave itself access to up to $900 million of Tether’s cash reserves, which Tether for years repeatedly told investors fully backed the tether virtual currency ‘1-to-1.’”
If the exchange-based token proves successful, it will allow IFinex to recoup the money in USDT in exchange for equity in the company.
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